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On the role of budgeting in the delegated provision of public goods under asymmetric information

  • Krause, Günter
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    The present paper investigates the neglected topic of budgeting rules for public bureaucracies performing governmental activities within predetermined budgets under rules governing expenditure levels and composition. We analyze the optimal budgeting scheme, if the bureaucracy has superior information vis – vis the policymaker. It is tasked with supplying different types of public goods and is subject to costly audits. The optimal budgeting scheme for the bureaucracy is determined. It is shown that it crucially depends on the level of auditing costs. The same holds for the extent of discretion given to the bureaucracy about levels and composition of public expenditures.

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    File URL: http://econstor.eu/bitstream/10419/22344/1/WEP51.pdf
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    Paper provided by University of Würzburg, Chair for Monetary Policy and International Economics in its series W.E.P. - Würzburg Economic Papers with number 51.

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    Date of creation: 2004
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    Handle: RePEc:zbw:wuewep:51
    Contact details of provider: Postal: Sanderring 2, D-97070 Würzburg
    Phone: (0931) 31-2901
    Fax: (0931) 31-2101
    Web page: http://www.vwl.uni-wuerzburg.de/en/no_cache/lehrstuehle/vwl1/home/
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    1. Tirole, J., 1993. "The Internal Organization of Government," Working papers 93-11, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. John Douglas Wilson & Roger H. Gordon, 2003. "Expenditure Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 399-417, 04.
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    4. Milton Harris & Artur Raviv, . "Capital Budgeting and Delegation," CRSP working papers 343, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    5. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    6. Besley, Timothy & Jewitt, Ian, 1991. "Decentralizing Public Good Supply," Econometrica, Econometric Society, vol. 59(6), pages 1769-78, November.
    7. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The economics of career concerns: part 2 :application to missions and accountability of government agencies," ULB Institutional Repository 2013/9641, ULB -- Universite Libre de Bruxelles.
    8. Boadway, Robin & Marceau, Nicolas & Sato, Motohiro, 1999. "Agency and the design of welfare systems," Journal of Public Economics, Elsevier, vol. 73(1), pages 1-30, July.
    9. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Cremer, Helmuth & Gahvari, Firouz, 2000. "Tax evasion, fiscal competition and economic integration," European Economic Review, Elsevier, vol. 44(9), pages 1633-1657, October.
    11. Boadway, Robin & Horiba, Isao & Jha, Raghbendra, 1999. " The Provision of Public Services by Government Funded Decentralized Agencies," Public Choice, Springer, vol. 100(3-4), pages 157-84, September.
    12. Roger H. Gordon & John D. Wilson, 1999. "Tax Structure and Government Behavior: Implications for Tax Policy," NBER Working Papers 7244, National Bureau of Economic Research, Inc.
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